Getting insurance agent and broker compensation out of health insurer medical loss ratio (MLR) calculations would probably lead to a big drop in MLR rebates. Analysts at the U.S. Government Accountability Office (GAO) estimate that excluding producer comp from Patient Protection and Affordable Care Act (PPACA) MLR calculations in 2012 would have cut total MLR payments 74 percent.
That would have reduced the average size of a rebate to $15.21 per plan enrollee in 2012, from $58.50. In 2011, the first year the PPACA MLR rebate program was in effect, excluding producer comp would have cut the average rebate 75 percent, to $20.90.
The GAO analysts reviewed the PPACA MLR program in a report prepared at the request of Sen. John Rockefeller IV, chairman of the Senate Commerce, Science and Transportation Committee.
PPACA now requires insurers to spending at least 85 percent of large group revenue and 80 percent of individual and small group revenue on health care and quality improvement efforts.
Producer groups have argued that brokers work for the coverage buyers, and that insurers handle payment of compensation to brokers as a courtesy to their customers. The GAO found that health insurers got better at meeting the MLR targets in 2012, the second year the MLR program was in effect.
The percentage that had to pay rebates fell to 21 percent, from 24 percent. The GAO analysts calculated the effects of excluding producer comp from MLR calculations by subtracting producer fees and commissions from the MLR denominator for each year and then determining whether the insurer would have met the PPACA MLR target with the recalculated MLR.
If the GAO analysts thought an insurer would have had to pay a rebate, based on the recalculated MLR, they then computed the size of the rebate.
The GAO analysts interviewed representatives at eight insurers, according to John Dicken, a GAO director. One insurer said the MLR system was a primary driver behind a major change in producer comp. Three others said they had reduced producer comp because of an industry trend toward paying producers a flat fee per application.
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